If you’re a discretionary futures trader do not do this..

Trader's Mindset

Jun 20

A small dose of reality…

Recently, I have been experimenting with trading with very tight risk limits. I am doing a combine in both TopStepTrader and trying out for an account at OneUp Trader, as well (for more information about these firms see my article: Prop Funding at my other blog). While I just started the OneUp Trader, I am taking the exact same trades in my live account as I do in the simulators (except in a couple cases due to technical problems or errata). The fills are exactly the same on most trades. A few trades are slightly optimistic but to my best knowledge, I am still getting filled at virtually the same prices on the next retouch. Everything is the same except for one difference: in the live, I am trading only 1 lot. On the simulators, I am loading extra contracts on my best trades. Now, just to be clear I am not sure whether or not I have any edge with this trading style because I am trading with very tight stop losses of typically only a couple ticks.  I do think my win rate is too low, to be honest. But, here is something I’ve observed: my TopStepTrader account is going mostly up while my live is only slightly up or break even over the same period. While I just started at OneUp Trader, I’m seeing a similar disconcerting pattern. I am able to run up the simulated accounts and while taking the exact same trades in live and getting the same fills: my live is not seeing the same performance. Because with only a single contract, I am not able to load my best trades.

If you are a discretionary trader do not attempt to trade futures with only 1 lot. Instead, trade a defined maximum of contracts but one that allows trading for bigger targets or size on best trades. Chaos within limits.

What is perhaps more illuminating is that even though my accounts go up faster when I trade more contracts, I am not seeing the inverse of the risk. Of course, there is additional risk: risk of making a mistake or loading extra size on the wrong trade. But, I think that is part of the reality of markets: most things that work take some form of asymmetric risk structure. As for systems or methods that work, they tend to either requiring using a bigger stop loss then target (tail risk), a smaller stop and larger target (risk of correlated losses, risk of lower volatility), or loading size on the best trades (risk of having bigger losses, risk of over optimization– while my discretionary is not optimized in traditional sense, I closed out 2 trades today to the tick that would have worked).

At this point, it makes little sense to continue with the triple jeopardy of possibly losing money in my live and on the try outs with a trading style that I can not be sure that works. As such, I am placing a pause to trading in the live account to focus on OneUpTrader opportunity and TST. It remains to be seen if I can make this trading style work.

Hypothetical/Simulated Performance. Not representative or typical. No claims.

tst results

The live results over same period.  I do not think all the trade costs are being reflected though because the account over this period is virtually flat. While there may or may not be an edge, the lesson is clear that limiting oneself to a single contract makes it much more difficult to profit. 


About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at curtis@beyondbacktesting.com.

  • Anslem Farmer says:

    Nice blog but cannot seem to locate the author’s name, maybe not looking hard enough? Either way, We all know trading can be mighty tough. However if I were to give my opinion on becoming a successful trader, I would say to an apprentice, trade one trade per day @ 1 lot size. Minimum SL should be 10-12 ticks, Profit Taking. Find a setup that’s comfortable for you. If you can do this on 5 trading days then 20 days onward should be no problem.

    Over the years of my experience trading, about 9 years, I have come to the realization that to succeed in this environment, it’s better to have a loss limit per day, followed by trading one market and one setup only. This is all aligned with sound money management evidently. Imagine yourself having $2000 to spend on the combine of TST or $2250 on One Up Trader and you were to spend this money in the space of 3 days. Get your own loss limit then, if that’s that case. Call it your own pll or personal loss limit. One trade a day would not hurt right? You have lots of time for yourself and family. My pll can range from 10 ticks to 30 ticks per day. If I am not disciplined on that day it’s going to be more. Not following my rules hurt ultimately just so you know.

    Varying your stopLosses, your lot sizes, and your profit targets can give you an unstable information on your performance. Again, it is my two cents that if one were to come close to how their performance would be, then they are to not change their lot sizes and their SLs should be a small range or gap. One goal you can make for yourself is to try trading from the London session to the end of the US session, and see how well you did when following your rules. One lot size with estimation of your stop loss can grow your account exponentially once you have defined your rules, make profits and after maybe your account grew 5 times then try 2 lots to see if you are ready.

    Now, these two companies are great for the consumer like myself and others who would like to make it big in the industry. Savius LLC is not far behind, they just need to get on board and learn from One Up Trader and what they are offering. It’s like you said, the LTP might be a hindrance in your performance, I know it has been in mine. So much so that I have left TST for good this time. I am trying One Up Trader but I might venture on my own if any psychological barrier comes up. Psychological barriers would be things like If I am funded and then TST tells me how to trade, meaning I should stop trading since I am losing my profits for the day. Nope I do not like that. Where were they when I was passing my combine? Another psychological barrier would be LTP which is more emphasized now that One Up is here. If tradingshcool.org info is correct on TST making all that money per year. Funding your own account I think is beneficial in the long run anyways.

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